Bloomberg News

GE Venture’s Leap-X Wins A320neo Virgin America Launch

June 15, 2011

(Updates with Paris Air Show orders in sixth paragraph.)

June 15 (Bloomberg) -- General Electric Co.’s narrowbody- engine venture won placement of its new Leap-X model on upgraded Airbus SAS jets for Virgin America Inc., ending rival Pratt & Whitney’s solo run on the more fuel-efficient plane.

Virgin America’s order from CFM International, a joint venture of GE and Safran SA of France, is valued at $1.4 billion at engine list prices, the companies said today. It includes Leap-X engines to power 30 A320neos and CFM56-5B models for 30 existing A320 jets. Burlingame, California-based Virgin America said in January it would triple its fleet.

The airline, partly owned by U.K. billionaire Richard Branson, will be the first carrier to use the Leap-X commercially, signaling confidence in the model after Pratt & Whitney’s geared turbofan won the first wave of orders on the upgraded A320neo earlier this year. CFM engines already power half of all narrow-body aircraft including Virgin’s current fleet, according to market researcher Ascend.

“They’ve never had a failed engine program,” Virgin American Chief Executive Officer David Cush said in a telephone interview. “Their engines always come in on time, on price and within the performance envelope they describe.”

The new engines will save as much as $1.9 million per aircraft with the inclusion of sharklets, wingtip devices that reduce aerodynamic drag, Virgin said. That estimate assumes 18 percent less jet-fuel usage and a price of $2.98 a gallon, Virgin said.

‘Better Takeoff Performance’

International Lease Finance Corp., the plane-leasing unit of American International Group Inc., is set to announce plans to put the Leap-X on 40 A320neo aircraft, and more orders are expected at the Paris Air Show, people familiar with the situation said earlier this month.

Virgin, which recently began offering flights to Chicago from Los Angeles and San Francisco, will be able to fly longer routes using the A320neo, Cush said. The plane is also more practical for short take-offs.

“This allows us to fly missions that the current A320 cannot fly -- it would allow us to fly to Hawaii from the West Coast,” Cush said. “It gives us better takeoff performance out of short runways in places like Reagan National or even LaGuardia.”

Virgin considered its engine options carefully, Cush said. The carrier was also in discussions with Pratt & Whitney for about a year, and the talks intensified in the past few months.

‘Compelling Offer’

“Pratt & Whitney put a very compelling offer on the table,” he said. “We looked at the geared turbofan. Ultimately CFM just had a more compelling offer.”

While neither engine maker disclosed a list price, analysts including Teal Group estimate CFM’s Leap-X and Pratt’s geared turbofan carry a price tag of $12 million to $13 million. Airlines rarely pay list prices for engines, instead negotiating discounts for bulk purchases.

The Leap-X relies on improvements in the engine’s core, or hot section, to help cut fuel consumption, while the geared turbofan uses a gear to slow the outer fan of the engine, adding efficiency and reducing noise. Leap-X’s technology is partly based on GE’s GEnx engine, which is a choice on the Boeing Co. 787 Dreamliner.

Fairfield, Connecticut-based GE is the world’s largest maker of jet engines. Pratt & Whitney is a unit of Hartford, Connecticut-based United Technologies Corp.

--Editors: James Langford, Stephen West

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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